Sorting Out the Mixed Signals

by Laura Ehrenberg-Chesler on January 31, 2013

in Economic Indicators,Employment,housing,inflation/deflation

Unemployment claims came out today.  The number was 368,000, which is still a lackluster number, and it is up from the previous week.  In addition, the fourth quarter GDP number was released yesterday, and it showed a contraction.

In spite of these disappointing figures, and the uncertainty of the fiscal cliff debate in December, the markets have continued to power higher in January.

However, the fundamental backdrop for equities is actually somewhat positive.  With some exceptions, inflation remains low, and interest rates continue to remain at historic lows with the Federal Reserve determined to keep them this way for the “foreseeable future”.  Chicago PMI was released this morning and it was a better than expected 55.6.  So, while consumers seem to be saving more and spending less, the rate of capital spending from corporations appears to be on the upswing.  The improvement in the housing market also provides support to the equity markets, and may ultimately help employment and consumer spending.

So, despite the mixed signals the various data points provide, the markets seem to be paying more attention right now to the favorable fundamentals of the economy which are driving stock prices higher.

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